CommInsure survey reveals Australians not protecting their income

27 March 2006

A national survey by the Commonwealth Bank’s insurance arm, CommInsure, has found that five out of six Australians are not adequately protecting their income in the case of illness or injury – which, in turn, means protecting their families and their lifestyle.

Alarmingly, CommInsure’s Income Protection survey showed that if those interviewed were to lose their income for three months, nearly a third would rely on savings and another one in five would rely on government assistance.

CommInsure Managing Director, Simon Swanson, indicated these figures were of concern considering that 57 per cent of respondents noted they had debts other than their home loan and 49 per cent were the only income earners in their household.

Income protection insurance, he believes, is commonly misunderstood among Australians with many not realising its potential value.

"Many people choose to protect their homes and their cars, a large proportion, however, overlook protection of an even more important asset - their income," Mr Swanson said.

"The results of the survey show the level of awareness of income protection insurance is relatively high but Australians are not taking it up as a way of protecting their lifestyle.

"Sometimes it’s not possible to plan for unforeseen circumstances or the challenges that life throws your way. When something unexpected or unplanned happens, people realise too late how important income protection is.

"Of concern to us is that nearly half of the respondents said that affordability was the main reason they did not have income protection insurance but many Australians don’t realise that it’s possible to protect your income from as little as $2 a day – or basically a cup of coffee.

"Income protection policies are also tax deductible, so in real terms, it’s even less than that," Mr Swanson said.

According to the survey, a third of Australians didn’t know enough about the range of features provided on many income protection policies today.

"The lack of awareness about the features can be partially attributed to less than 75 percent of respondents having a financial adviser," Mr Swanson said.

Some of the features available on income protection policies include:

It may be tax deductible

It can provide up to 75 per cent of a salary

The payments from an income protection policy can last up to age 65

Mr Swanson said the insurance industry in general faces a challenge in educating people about issues such as protection of lifestyle. There is an ongoing need to develop and improve the financial literacy and awareness of the average Australian - a key aim of the Commonwealth Bank Foundation. Through the Foundation, the Bank offers programs that promote education and financial literacy in our community.

Key Findings:

Five out of six respondents do not adequately protect their income

Less than 75 per cent of respondents do not have a financial planner

Forty-one percent of respondents have a home loan, 34 per cent have dependent children, 57 per cent have debts other than their home loan and 49 per cent were the only income earners in their household

If they were to lose their income for 3 months, 31 per cent would mainly rely on savings, 21 per cent would rely on government welfare and 20 per cent would rely on family members

34 per cent did not know enough about income protection insurance, with 15 per cent of respondents saying this was the main reason for not purchasing a policy